Nissin Foods Holdings Co.,Ltd. (TSE:2897) Not Flying Under The Radar

With a median price-to-earnings (or "P/E") ratio of close to 14x in Japan, you could be forgiven for feeling indifferent about Nissin Foods Holdings Co.,Ltd.'s (TSE:2897) P/E ratio of 15.8x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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While the market has experienced earnings growth lately, Nissin Foods HoldingsLtd's earnings have gone into reverse gear, which is not great. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Check out our latest analysis for Nissin Foods HoldingsLtd

Keen to find out how analysts think Nissin Foods HoldingsLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Nissin Foods HoldingsLtd's Growth Trending?

In order to justify its P/E ratio, Nissin Foods HoldingsLtd would need to produce growth that's similar to the market.

Retrospectively, the last year delivered a frustrating 7.7% decrease to the company's bottom line. Even so, admirably EPS has lifted 54% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 8.3% each year during the coming three years according to the ten analysts following the company. Meanwhile, the rest of the market is forecast to expand by 9.5% per annum, which is not materially different.

In light of this, it's understandable that Nissin Foods HoldingsLtd's P/E sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Nissin Foods HoldingsLtd's P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Nissin Foods HoldingsLtd's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You always need to take note of risks, for example - Nissin Foods HoldingsLtd has 1 warning sign we think you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.